Editor’s Notes: Commercial Real Estate will need to be addressed sooner or later. These markets are inter-connected to the point where when they grow, they grow together and when they collapse it pulls down the other sectors. There has been lobbying on behalf of the commercial mortgage industry to have some assitstance along the lines of possible helping commercial property owners refinance their properties at lower rates. Here was a comment I found interesting being that it asks for leverage to come back to the markets and I am not sure that is what the doctor ordered - “Essentially it is a joint venture to create a government- sponsored shadow bank to return leverage to the marketplace,” McCulley said. “It is exactly what the doctor ordered.”
News (Bloomberg):
Pacific Investment Management Co.’s Paul McCulley said problems still exist in the commercial mortgage market even as economic data including today’s housing price gains indicate the economy is in a bottoming process.
“The commercial securitization market is broken,” said McCulley, a partner and fund manager at Pimco, in a Bloomberg Television interview from Newport Beach, California. “The focus in the last couple years has been on the residential side, but we are having a bust of sorts on the commercial side.”
The $1 trillion Term Asset-Backed Securities Loan Facility, or TALF, is intended to jumpstart the markets for asset-backed securities made up of residential and commercial mortgages and other loans. The program got off to what New York Federal Reserve Bank President William Dudley said last week was a “relatively slow start.” Investors are balking because of restrictions imposed by Congress on hiring foreign workers and concern lawmakers will retroactively tax earnings.
The Treasury said today that asset managers who participate in the government’s Public-Private Investment Program, or PPIP, an initiative to rid banks of difficult-to-value real estate assets, will only face pay limits if they have a “controlling” interest in the investments.
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